The pivot is the key level of support or resistance and the longer the time period the more important it becomes. One thing I have observed about quarterly pivots is that you come up with levels that are generally not derived from other methods. They also can give you a bias for three months of trading. When a market starts off a quarter above its quarterly pivot it has an upward bias, or if it opens the quarter below it, there is a downward bias for the market you are analyzing.
I am not aware of any technical analysis programs that currently include quarterly pivots in their standard packages, but I expect this to change next year. In my charts for this article I have manually entered the quarterly values in MetaStock.
This chart of the Spyder Trust (SPY) covers the period from the last quarter of 2008 through the second quarter of 2010. The SPY opened on October 1, 2008, at $115.27, which was well below the 4th quarter pivot (line 1) of $119.36. By the second week of the new quarter, the S1 at $107.18 and S2 at $98.40 had both been broken as the low on October 10 was $83.58.
The SPY had a 4th quarter low of $74.34 and opened 2009 at $90.44, which was below the 1st quarter pivot (blue line) of $93.75. On January 5 and 6 (point 2), the SPY slightly exceeded the pivot level as the high was $94.55 and $94.45 respectively.
The following week, the SPY violated the prior five-week lows and once again the sellers took over. The S1 level for the 1st quarter was at $70.82, which was just broken the first week of March as the market was making its low. The SPY opened the 2nd quarter at $78.53, which was above the 2nd quarter pivot, point 3, at $76.25.
Therefore the bias for the second quarter was positive and first resistance (S1) at $85.40 was exceeded on April 9, 2009. This turned the focus on the S2 (red line), which was at $103.70. The 2nd quarter high was $96.11 and the SPY opened the 3rd quarter at $92.34, which was above the 3rd quarter pivot at $88.79.
The pivot level was broken for five days in July, point 4, as the low was $87. It is interesting to note that the monthly S2 for July was at $87.62, and on July 13 SPY closed strongly back above the quarterly pivot. Two weeks later the quarterly S1 at $99.26 was exceeded.
In September, as the quarter was drawing to a close the quarterly S2 resistance at $106.57 was exceeded and the next day the monthly S2 for September at $107.88 was hit as the high was $108.06, point 5.
For the last quarter of 2009, the pivot was at $100.21, which was well below the quarter’s open at $105.34. During the last quarter, the SPY failed to reach the S1 at $113.43 (point 6) as the high was $112.38. The SPY opened 2011 at $112.37, which was above the quarterly pivot at $108.82.
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